To: RocketMan who wrote (29502 ) 8/19/2000 12:08:08 AM From: dwayanu Read Replies (3) | Respond to Hi RocketMan:..a no-brainer with downside protection, which as V says is the best reason for CCs. Options as a Strategic Investment , "Covered call writing is the name given to the strategy by which one sells a call option while simultaneously owning the obligated number of shares of underlying stock. The writer should be mildly bullish, or at least neutral, toward the underlying stock. By writing a call option against stock, one always decreases the risk of owning the stock. It may even be possible to profit from a covered write if the stock declines somewhat. However, the covered call writer does limit his profit potential and therefore may not fully participate in a strong upward move in the price of the underlying stock. .... The strategy of owning the stock and writing the call will outperform outright stock ownership if the stock falls, remains the same, or even rises slightly. In fact, the only time that the outright owner of the stock will outperform a covered writer is if the stock increases in price by a relatively substantial amount during the life of the call. Moreover, if one consistently writes call options against his stock, his portfolio will show less variability of results from quarter to quarter."However, as clapton and others pointed out, if the vehicle keeps dropping, you have to uncover and rewrite to stay ahead of the game. But, 2-3% per month is not bad.
